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Subject COMMERCE

Paper No and Title 5. Business Environment

Module No and Title 27. Emergence of Rural Sector in India

Module Tag COM_P5_M27

COMMERCE PAPER No. 5: Business Environment

MODULE No. 27 : Emergence of Rural Sector in India
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TABLE OF CONTENTS
1. Learning Outcomes
2. Introduction
3. Nature of Rural Community
4. Growth of Rural Sector
5. Rural Sector in India
6. Study of Rural Development
7. Measures employed for Rural Development
7.1 Agricultural Development
7.1.1 Causes of unsatisfactory agricultural development in India
7.2 Non- Agricultural Development
8. Rural Transformation
9. Schemes and programs launched by government
10. Summary

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1. Learning Outcomes
After studying this module, you shall be able to

 To discuss the nature of rural community.

 To study rural sector in Farm as well as Non-Farm sector.
 To know about various key areas to be employed for Rural Development.
 To explore various schemes launched by government for rural development.

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2. Introduction
There are two Indias- one which is present in villages, that is Bharat and the one which exist in
urban area that is India. For the growth and prosperity of the whole country, it is necessary that
both these Indias converge. In rural India, majority of people still live below the poverty line.
Many issues need attention in rural areas like health, education and sanitation.

As it is well known nature of India that it is agrarian economy, even then our productivity is
amongst the lowest in the world. Agricultural growth is critical and needs to be picked up. But
India must go beyond agriculture and it has to make a real impact on the people living in rural
areas. Primary contributions to rural business and economy are made by Agriculture, handicrafts,
fisheries, poultry and dairy. The apex body which is involved in formulation of policies,
regulations and acts related to development of rural sector is the Ministry of Rural Development.

3. Nature of Rural Community

The different features of rural community are as follows:

1. Joint Family System: The rural community still retains the joint family system where the
oldest male member is the head of the family who takes all the major decisions in the family. All
the other family members have to abide by the decision taken by the head of the family. All the
family members are engrossed in the agriculture where men plough the land, women harvest
crops and children gaze the cattle.

2. Role of neighborhood: The rural community is characterized by closest neighborhood

relations. In rural community everyone pays attention to the sorrows and joys of the neighbors.

3. Religion: The villagers have great faith in religion and God as for their crops they depend upon
the nature and they have fear of natural ups and downs.

4. Intimate relationship: People living in the rural areas lead simple life with a sense of unity
and intimate relationships among them. Their customs, traditions and culture are common. They
participate in each other’s celebrations.

4. Growth of Rural Sector

The growth of rural sector depends upon the following factors:

1. Topographical factors: These factors include land, water and climate. People would like
to live in a place where soil is fertile, water is safe for drinking, bathing, cooking and
irrigation and climate is not extreme but normal.

2. Economic factors: These factors include conditions of agriculture, economy and cottage
industry. Agriculture is base of rural sector. The growth of rural sector depends majorly
on the condition of agriculture. Therefore, economic and social condition of farmer plays

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an important role in the growth of rural sector. The

farmers must be in a position to buy good quality
seeds, scientific implements and good breed of cattle.

Also, the presence of cooperative societies will boost their position by providing capital.
For landless people living in rural area, development of cottage industry is essential. That
is why, government of developing countries like India provide incentive to cottage
industries for their establishment and development.

3. Social factors: These factors consist of peace, security, cooperation, intelligence etc. The
guarantee of security and peace is necessary for the development of rural sector. Security
here means social security, health security and security of their crops. This security can
be given by offering them insurance facilities. As villages and rural areas are considered
as backward therefore, it is necessary to impart the training so that they will be intelligent
enough to make use of scientific inventions.

5. Rural Sector in India

According to 2001 census, 72.2% of the population lived in about 638,000 villages and the
remaining 27.8% lived in more than 5,100 towns and over 380 urban agglomerations. In 2015-16
budget, government of India gave due attention to Rural Development coupled with increased
allocation to farm sector. Several new initiatives have been launched. Significant resources have
been provided to those rural development programs which require more money. Apart from
specific allocation of Rs 79,526 crore for rural development, several initiatives and allocations for
infrastructure, railways and social schemes for poor will benefit rural folks as these investments
are going to be for 60 per cent of 1.2 billion populations living in rural areas.

6. Study of Rural Development

Though rural economy is defined by predominance of agricultural activities, manufacturing and
services are also prevalent to some extent. Manufacturing and services are clubbed together to
form non-farm sector for analytical convenience. So, the study of rural development can be made
in two parts:

1. Farm Sector
2. Non-Farm Sector

Farm sector includes activities like agriculture (crop production), plantation, animal husbandry
(milk, meat, egg etc), forestry & logging and fishing, whereas the non-farm sector includes all
other activities like agro-processing industries, wholesale and retail trading, storage and
communication, transport and education , health industries and other service related activities.

Rural non-farm sector (RNFS) plays an important role in reducing the widespread rural poverty
through generation of employment and income and creation of effective demand for goods and
services. The role becomes important as it can provide diverse employment opportunities to the
rural people and in the process transform the rural economy in the desired direction of inclusive
growth.

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7. Measures Employed for Rural Development

To study about rural development, it is necessary to categorize rural development into two parts:

A. Agricultural Development
B. Non Agricultural Development

7.1 Agricultural Development

Many measures have been adopted for agricultural development. These measures can be
categorized into two parts, i.e. Technical and Institutional Methods.

Technical Methods mainly include multiple cropping, expansion of irrigation, use of fertilizers,
HYV seeds, plant protection, scientific cultivation, mechanization, development of agricultural
land and improvement in animal husbandry etc.

Whereas institutional methods include land reforms, improvement in agricultural marketing by

putting efforts for regulated markets, cooperative marketing societies and by providing them
security through the introduction of support prices and last but not the least giving them credit
facilities.

7.1.1 Causes of unsatisfactory agricultural development in India

All the factors which are responsible for unsatisfactory development in agriculture can be
categorized into following parts:
I. Human factors:
II. Institutional factors
III. Technical factors

I. Human Factors

Human factors are related to training, health and efficiency of farmers and their social traditions.
Factors which are responsible for agricultural backwardness are:

1. Excessive increase in population has given rise to the problems of sub-division of land,
fragmentation, disguised unemployment and thus, fall in the saving capacity of the
farmers.
2. The conditions of small farmers, landless farmers and share croppers are neglected while
forming plans and policies.

II. Institutional Factors

Institutional factors are regarding those who actually take decisions regarding agricultural
produce. Following are the factors which are included in this category:

1. Presence of defective land reforms and no concrete measures taken to implement those
which are formed in five year plans have led to failures in agriculture.
2. Policies formed in respect of agriculture in five year plans lacked coordination.
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3. Critics assert that till last five year plan less investment
has been made in agriculture. Also, whatever
investment has been made in agriculture, it benefitted the prosperous farmers the most.

III. Technical Factors

They are related to prevailing techniques of production. Following factors are considered in this
category:

1. Agriculture in India depends mainly on rainfall for its irrigational requirements. Rainfall
is uncertain and therefore making agricultural production uncertain. Sadly, irrigation
facility is not sufficient for all the cultivable land. This poses a great deal of problem for
farmers.
2. Indian agriculture is still dominated by the use of old and traditional tools and
implements. Thus, productivity of land does not increase and agricultural production falls
short.
3. Farmers do not understand the importance of HYV seeds and thus, does not make proper
use of them. Also, the supply of these seeds is not adequate and they are expensive as
well.
4. Farmers face a lot of problem in getting credit facilities or loans. They still depend on
local money lenders for their requirements of loans and for that they have to pay large
amount of their income as interest to money lenders. Sometimes, they are forced to sell
their product or part of land to these moneylenders, which in turn decreases their income
and have an adverse effect on agriculture.
5. Indian farmers do not make use of adequate manure. They stick to cow dung as it is
cheaper and easily available. They find chemical fertilizers to be expensive and are
imported largely from foreign countries.
6. Marketing system of Indian agriculture is defective due to which they do not get
remunerative prices for their produce. Transport facilities are not well developed and so
they sell their crops to local village trader who offers them low price. As a result, farmers
are discouraged to produce more and better quality crops.

All the above factors collectively are responsible for unsatisfactory performance of
agriculture in India.

7.2 Non- Agricultural Development

Non-agricultural sector or Rural Non-Farm Sector consists of all those activities which are non-
agricultural and located in rural towns and small towns. Agriculture is the prime mover behind
the emergence and growth of rural non-farm sector. Therefore, Rural-Non-Farm-Activities play
an important role to provide supplementary employment to small and marginal farm households,
reduce income inequalities and rural-urban migration.

8. Rural Transformation
For considerable and sustainable rural sector development, power of agriculture needs to be
harnessed. To achieve this, small farmers should be given food security, environmental

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sustainability and economic opportunity. India should develop

its own vision for agriculture which is inclusive and
sustainable.

India should go beyond agriculture if it wants to achieve sustainable development for rural sector.
Rural India lacks in infrastructure, information, education and skills and capital at reasonable
rates. It is necessary to make rural India self-reliant and less dependent on government subsidies.
Following are some key areas which need to be look upon to achieve this endeavor:

1. Access to urban areas: Farmers can get better prices for their produce if they can access
the market directly. The National Capital Region (NCR) is a very good example in this
regard. Such regions are located within 50 km distance from a large city. Access to urban
services has led to higher level of knowledge and new and better sources of livelihood. A
rural area which does not have easy access to such urban areas cannot progress as equally
as areas like NCR can.

2. Technology Adoption: Technology not only ensures quality of services but also equality
of access to all. Some of the examples in this regard are mobile networks making internet
networks possible in the rural areas, Unique Identification Program (AADHAAR
Scheme), opening up of new avenues for delivery of service to people including e-
governance, e-education and e-medicine etc. This will enable young people to move to
villages for job avenues which in turn will halt the unplanned migration from rural to
urban areas.

3. Financial Inclusion: Financial inclusion means providing banking services to vast

sections of disadvantaged and low income group at affordable cost. This will eliminate
unbearable debt for the poor by the local money lenders. It would help in building SSEs
and other avenues.

4. Education and Health: Government of India over the last couple of decades has
launched many policies relation to education like Right to Education. State and central
government has also invested in building primary schools and making primary education
compulsory for children. Now, introduction of new technologies like e-education and
compulsory senior secondary education is necessary and need of the hour. E-learning will
transform the cost of education and quality of education.

Health care in rural communities is another area of concern in developing countries.

Imparting health education for prevalent issues like maternal and child mortality, HIV,
tuberculosis and malaria is essential. Malnutrition is also common pathological condition
prevalent in rural areas.

5. Skill Development: Unemployment or underemployment is another major issue of

concern in rural development. With education, young people want to go beyond farming.
Current educational programs do not impart sufficient skills for service oriented
economy. Therefore, appropriate skill building is crucial need for the rural economy for
industries like hospitality, BPO, retail etc.

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Together with new vision of agriculture, these enablers can

bring prosperity to rural India. However, challenge of sustainable growth also needs to be
addressed as increasing consumption is putting pressure on scarce resources.

9. Schemes and programs launched by Government

As majority of the poor reside in the rural areas, the prime goal of rural development is to
improve the quality of life of the rural people by alleviating poverty through the instrument of
self-employment and wage employment programmes, by providing community infrastructure
facilities such as drinking water, electricity, road connectivity, health facilities, rural housing and
education and promoting decentralization of powers to strengthen the Panchayati raj institutions
etc. The various strategies and programs of the Government for rural development are discussed
below:

1. Integrated Rural Development Program (IRDP): First introduced in 1978-79, IRDP has
provided assistance to rural poor in the form of subsidy and bank credit for productive
employment opportunities through successive plan periods. Subsequently, Training of
Rural Youth for Self Employment (TRYSEM), Development of Women and Children in
Rural Areas (DWCRA), Supply of Improved Tool Kits to Rural Artisans (SITRA) and
Ganga Kalyan Yojana (GKY) were introduced as sub-programs of IRDP to take care of
the specific needs of the rural population.

2. Wage Employment Programs: Anti-poverty strategies, like assistance to the rural poor
families to bring them above the poverty line by ensuring appreciable sustained level of
income through the process of social mobilization, training and capacity building. Wage
Employment Programs have sought to achieve multiple objectives. They not only provide
employment opportunities during lean agricultural seasons but also in times of floods,
droughts and other natural calamities. They create rural infrastructure which supports
further economic activity. It encompasses Swarnjayanti Gram Swarozgar Yojana
(SGSY), Sampoorna Grameen Rozgar Yojana (SGRY) and National Rural Employment
Guarantee Act (NREGA) etc. NREGA is an act of parliament. It is not merely a scheme
or policy. It aims at enhancing the livelihood security of the people in rural areas by
guaranteeing hundred days of wage employment in a financial year, to a rural household
whose members volunteer to do unskilled manual work. The objective of the Act is to
create durable assets and strengthen the livelihood resource base of the rural poor.

3. Employment Assurance Scheme (EAS): EAS was launched in October 1993 covering
1,778 drought-prone, desert, tribal and hill area blocks. It was later extended to all the
blocks in 1997-98. The EAS was designed to provide employment in the form of manual
work in the lean agricultural season. The works taken up under the program were
expected to lead to the creation of durable economic and social infrastructure and address
the felt-needs of the people.

4. Food for Work Program: The Food for Work program was started in 2000-01 as a
component of the EAS in eight notified drought-affected states of Chattisgarh, Gujarat,
Himachal Pradesh, Madhya Pradesh, Orissa, Rajasthan, Maharastra and Uttaranchal. The
program aims at food provision through wage employment. Food grains are supplied to

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states free of cost. However, lifting of food grains for

the scheme from Food Corporation of India (FCI)
godowns has been slow.

5. Rural Housing: Initiated in 1985-86, the IAY is the core program for providing free
housing to families in rural areas. It targets scheduled castes (SCs)/scheduled tribes
(STs), households and freed bonded laborers. The rural housing program has certainly
enabled many BPL families to acquire pucca houses. The coverage of the beneficiaries is
limited given the resource constraints. The Samagra Awas Yojana (SAY) was taken up in
25 blocks to ensure convergence of housing, provision of safe drinking water, sanitation
and common drainage facilities. The Housing and Urban Development Corporation
(HUDCO) has extended its activities to the rural areas, providing loans at a concessional
rate of interest to economically weaker sections and low-income group households for
construction of houses.

6. Social Security Programs: Democratic decentralization and centrally supported Social

Assistance Programs were two major initiatives of the government in the 1990s. The
National Social Assistance Program (NSAP), launched in August 1995 marks a
significant step towards fulfillment of the Directive Principles of State Policy. The NSAP
has three components: a) National Old Age Pension Scheme (NOAPS); b) National
Family Benefit Scheme (NFBS); c) National Maternity Benefit Scheme (NMBS). The
NSAP is a centrally-sponsored program that aims at ensuring a minimum national
standard of social assistance over and above the assistance that states provide from their
own resources. The NOAPS provides a monthly pension of Rs. 75 to destitute BPL
persons above the age of 65. The NFBS is a scheme for BPL families who are given Rs.
10,000 in the event of the death of the breadwinner. The NMBS provides Rs. 500 to
support nutritional intake for pregnant women. In addition to NSAP, the Annapurna
scheme was launched from 1st April 2000 to provide food security to senior citizens who
were eligible for pension under NOAPS but could not receive it due to budget
constraints.

7. Land Reforms: In an agro-based economy, the structure of land ownership is central to

the wellbeing of the people. The government has strived to change the ownership pattern
of cultivable land, the abolition of intermediaries, the abolition of zamindari, ceiling laws,
security of tenure to tenants, consolidation of land holdings and banning of tenancy are a
few measures undertaken. Furthermore, a land record management system is a pre-
condition for an effective land reform program. In 1987-88, a centrally-sponsored scheme
for Strengthening of Revenue Administration and Updating of Land Records (SRA &
ULR) was introduced in Orissa and Bihar.

Rural India is a powerhouse waiting to emerge. The exciting vision has to be the convergence of
rural Bharat with urban India. In order to realise this vision, we need inclusive growth. A new
vision for agriculture will uplift millions of small farmers. At the same time, we need to go
beyond agriculture. We need a broad based strategy to provide rural India access to markets and
technology, financial inclusion, and human capital development.

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10. Summary
 Agricultural growth is critical and needs to be picked up.
 The apex body which is involved in formulation of policies, regulations and acts related to
development of rural sector is the Ministry of Rural Development.
 The rural community still retains the joint family system where the oldest male member is the
head of the family who takes all the major decisions in the family.
 The growth of rural sector depends upon topographical, economic and social factors.
 According to 2001 census, 72.2% of the population lived in about 638,000 villages and the
remaining 27.8% lived in more than 5,100 towns and over 380 urban agglomerations.
 Rural non-farm sector (RNFS) plays an important role in reducing the widespread rural
poverty through generation of employment and income and creation of effective demand for
goods and services.
 To achieve sustainable rural development, small farmers should be given food security,
environmental sustainability and economic opportunity.
 Rural India lacks in infrastructure, information, education and skills and capital at reasonable
rates.
 The Food for Work program was started in 2000-01 as a component of the EAS in eight
notified drought-affected states of Chattisgarh, Gujarat, Himachal Pradesh, Madhya Pradesh,
Orissa, Rajasthan, Maharastra and Uttaranchal.

COMMERCE PAPER No. 5: Business Environment

MODULE No. 27 : Emergence of Rural Sector in India